Some Pointers on Goods and Services Tax in Singapore

In Singapore’s tax system, Goods and Services Tax is among the greatest concerns of anyone who works in the service or retail sector.

Innocuous as it may seem, one needs to at least have a basic understanding of this form of tax to ensure regulatory compliance and to avert any number of costly fines and penalties.

The concept of Goods and Services Tax in Singapore

As its name hints, Goods and Services Tax (GST) refers to a consumption tax levied on the purchase of goods and services and goods imported into the city-state.

Better known as Value Added Tax or VAT in some regions, GST is an indirect tax, meaning that it is collected and then remitted back to the government by a registered trader acting as an intermediary.

GST is divided into input and output taxes.

As a trader or an owner of a business who has registered for GST, you have to pay an amount of tax on the purchase of the supply used to render your goods and/or services. This amount is known as input tax.

Thereon, when your customers buy the goods and/ or services that you offer, they have to pay a specified amount of tax. This amount you charge the customer upon their payment is referred to as output tax.

When you file the GST return, if the output tax is larger than the input, you must make a payment to compensate for the difference. If the input is larger, you may offset it and get refunded.

In light of all that, it is now crystal clear that your business acts as a medium collecting GST on behalf of the government. In Singapore, the rate of GST is currently 7% and has been set to increase to 8% starting January 1st, 2023.

Benefits and drawbacks of GST Registration

You can voluntarily register GST for your business even if you are not obliged to do so.  Here are some pros and cons you should take into account before applying for it.

Some advantages of GST you can enjoy are:

• Only sizable companies are held liable for GST. Therefore, voluntarily or otherwise, registering for GST is an indicator of a viable business.
• GST helps reduce business expenses as your company can offset the input tax it paid against the output tax it has collected.

The disadvantages you need to consider:

• You would be subject to several filing and administrative requirements, not to mention record keeping.
• Your customers would feel bitter knowing that they are charged additional taxes if they have no idea what GST is and its purpose of it.
• Registering for GST would likely bring about the need to hire one or a couple of well-versed accountants

The requirement for GST Registration in Singapore

Here are some clear signals that it is time to register for GST:

• Under a retrospective view, the taxable turnover of your company at the end of a calendar year on or after January 1st for the past 12 months is assessed at an amount beyond S$1 million.
• From a perspective view, the taxable turnover of your company at any given point is projected with certainty to exceed S$1 million for the next 12 months

After the incorporation in Singapore, once your company’s taxable turnover reaches more than S$1 million, you are given a time limit of 30 days to file the GST application with IRAS. There is no grace period so, sure enough, any failure to miss this deadline would eventuate in penalties.

As aforementioned, if you are not required to register for GST, you can still voluntarily apply for registration if you wish to claim input tax for purchases of goods and services.

How to register

There are many available options to choose from, you can either:

• Apply for GST registration online by using your Corp Pass account to log into myTax Portal 
• Reach out to a corporate service provider for support.

Once the registration is approved, you would be advised of it forthwith by a Notification of GST Registration letter, which details your GST number, the date your company is subject to GST, the frequency with which you must file the tax, its deadline, and other relevant instructions.

Types of supplies exempted from GST in Singapore

You would have to pay GST if you render any goods or services that are labeled as standard-rated supply.

A standard-rated supply is the supply of goods and services that are subject to the standard tax rate. Most types of supplies in Singapore are of this sort.

Yet there are quite a number of categories that are entitled to the exemption from GST, which are:

• A zero-rated supply is any good or service that is charged at the tax rate of 0%. This category of supply comprises exported goods and international services supplied to customers located outside of Singapore. It should be well-noted that not all services provided to foreigners are zero-rated, only services that meet the description of international services under Section 21(3) of the GST Act.
• An exempt supply is exempt from GST, e.g. the sale and lease of residential properties, importation and local supply of investment precious metals (IPM), financial services, exchange of digital payment tokens for fiat currency or other digital payment tokens, provision of loans of digital payment tokens, etc.
• An out-of-scope supply is any good and service that is not subject to GST, and thus need not be reported in the GST return if it falls under any of the following categories:
  • Sale where goods are delivered from overseas to another place overseas
  • Sales Made Within Free Trade Zone/Zero GST Warehouse
  • Private transactions for non-business purposes.

Exemption from GST registration in Singapore

Fortunately, you can seek an exemption from the requirement to register for GST if:

• Zero-rated supplies over total taxable supplies exceed 90%
• The company would be in a net refundable position had it been GST-registered

As soon as you get the seal of approval from IRAS, you are not obliged to GST registration and avoid the process of filing it several times a year.

You can also apply for exemption of GST registration if you qualify for registration under a retrospective basis but you expect to see a significant decrease in sales volume that could result in taxable turnover falling below S1 million in the next 12 months.

Goods and Services Tax deregistration in Singapore

You must cancel the GST registration under any of the following scenarios:

• You stopped selling taxable goods or services, and do not intend to revert in the future.
• Your business has ceased
• The entire business is transferred to a new owner
• There has been a change in the structure of your company (e.g., from a general partnership to a limited liability partnership, or from a sole proprietorship to a private limited company). The next step is to determine whether GST registration is required for the new business entity.

You can also apply for GST deregistration voluntarily if your taxable turnover in the next 12 months is expected to decrease below S$1 million. In such a case, you will be asked to provide supporting documents as proof.

In addition, applying for cancelation of voluntary GST registration would require a business to be remained registered for at least 2 years before deregistration.

Should you wish to file a petition for deregistration, you first need to lodge an application form attached with other relevant documents within 30 days from the date your company halts the collection of GST.

The consequences of failing to file GST in Singapore

Both GST return and payment fall due one month following the end of your accounting period.

If you miss the deadline for making a tax payment, your business would incur a penalty of 5% for the first month of late payment.

Unpaid taxes may be subject to an additional 2% penalty per month, not to exceed 50% of the unpaid amount, if they remain unpaid 60 days after the imposition of the 5% late payment penalty.

If IRAS sees that you are neglecting the duty to file the return, they would notify you of your violation by sending a “Notice of Assessment” with their estimated tax plus a penalty of 5% percent.

A further penalty of $200 would be imposed immediately for the first month of late filing and any subsequent months with outstanding GST returns, which would be accumulated until reaching the $10,000 cap.

Some incentives for Goods and Services in Singapore

Under IRAS, an owner of a company regardless of scope is offered a wide range of GST Incentives Schemes, the purpose of which is to help businesses ease the trouble of excessive red tape and drive growth for Singapore’s overall economy.

• Cash Accounting Scheme: A small business whose annual turnover is less than S$1 million can account for output tax upon receipt of the payment.
• Gross Margin Scheme: For second-hand businesses with no GST input, GST is assessed based on the gross margin instead of the total value of the goods and/or services you render.
• Major Exporter Scheme: Import – Export businesses handling a vast amount of zero-rated goods are allowed to suspend their GST.
• Hand-Carried Exports Scheme: goods that are hand-carried out of Singapore by overseas customers via Changi International Airport can be exempted from GST.
• Zero GST Warehouse Scheme: under certain conditions, a business owner can store their imported non-dutiable goods for as long as he/she pleases in a licensed premise while enjoying GST suspension.
• Discounted Sale Price Scheme: Second-hand or used vehicles can be charged 50% of the selling price for GST purposes.
• Import GST Deferment Scheme: For approved businesses, the GST payment levied on the imported goods can be deferred until the due of filing GST returns instead of paying at the time of importing goods.

Got a question regarding GST in Singapore? Drop us a message or send us an email via service@bbcincorp.com to talk to our consultants!